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Changing the supply chain equation

HP is the world’s largest information technology (IT) company and has the
industry's most extensive supply chain—with more than 700 production suppliers
working in more than 1,200 locations worldwide and employing more than
300,000 people. We embrace the challenge of raising standards in our supply
chain and have been driving social and environmental responsibility (SER)
progress for ten years. The insight we have gained helps us to continue to make
improvements in our global production network even as we continue to uncover
new challenges.

Raising standards through collaboration

When we founded our program in 2000, we designed it to be collaborative and
to promote continual improvement in supplier facilities. Working with industry
and community groups and other stakeholders helps us widen and strengthen
our influence. Early in our program, we co-led the development of the Electronic
Industry Code of Conduct (EICC), the standard which is now applied across the
industry’s global supply chain and which HP has adopted.

Based on this code of conduct, our work with suppliers follows a four-phase
process. In phase one, we assess suppliers’ risks and establish a contractual
framework for SER performance expectations. In phase two, HP’s suppliers
conduct self assessments that help them to understand, prioritize and address
specific risks. Higher-risk suppliers move into a third phase of validation and
improvement through onsite audits. In the fourth phase, we address needs
for supplier capability building and education and implement regionally based
programs designed for continual improvement.

HP has engaged more than 600 suppliers in this process and conducted over
500 supplier site audits since 2000. Since then, suppliers’ performance has
improved and the number of nonconformances seen in our earlier audits has
decreased in many areas.

Engaging locally and regionally for long-term success

Improving supply chain standards is an ongoing process, and collaboration
is vital to our program’s success. While assessing conformance is essential,
our goal is long-lasting change. To achieve this we have found it important
to go beyond assessment and actively support suppliers in developing their
labor, health and safety, environmental, and ethics management capabilities.

HP provides the level and types of support appropriate for each region’s
specific needs within our supply chain. We invest in supplier training, often in
collaboration with local nongovernmental organizations (NGOs) and industry
partners.

Engaging locally ensures our programs address the area’s key challenges and
concerns raised by audit results, while strengthening our relationships. For
example, in 2009 we concluded a two-year project with local training providers
and the Hong Kong–based labor rights organization Students and Scholars
against Corporate Misbehaviour to conduct programs in two supplier factories
in China. The pilot program, which included labor rights training for workers,
was the first of its kind in the IT industry. The program trained more than 4,000
workers, as well as dozens of workers’ representatives, and tested the feasibility
of a third-party hotline for workers to raise their concerns.

Another example is the Health Enables Returns project (HERproject). HP joined
the HER project in 2008 in Mexico, initiating a health training program at two
supplier factories. The program helps female workers meet their health needs by
improving their awareness and access to services through partnerships between
companies, factories and local nonprofit service organizations. Training involves
health assessments of female workers followed by peer health educator training.
Supplier management has responded positively as well, satisfied by the positive
impact on health, workplace satisfaction, and turnover generated by the program
without disrupting production.

We continue to adapt and implement similar programs where they are needed in
different regions.

Promoting transparency in the supply chain

We believe that transparency gains trust, which improves the effectiveness of
our supply chain work. We provide global and regional summaries of our audit
findings as well as detail of our supplier capability building programs in our
Global Citizenship Report.

In 2007 we were also the first in our sector to publish the names of our
suppliers and we
continue to do so. This remains an industry-leading practice.

Addressing new challenges in materials sourcing

We continue to face new challenges in our supply chain and are committed
to addressing them. For example, a number of stakeholders have alerted us
to reported human rights violations associated with trade in minerals from
conflict regions of The Democratic Republic of Congo (DRC). The minerals
are ores of gold, tantalum, tin and tungsten, metals used in components
commonly found in electronics products. While all four metals are used by
many other industries and are also sourced from regions other than the
DRC, HP considers it unacceptable that the sourcing of metals eventually
incorporated into our products could be contributing to armed conflict.

Although companies who source these minerals are generally far removed from
HP, typically multiple tiers from our direct suppliers, we have a shared responsibility
regarding conflict-free mineral sourcing.
At this time, there is no certification mechanism that can assure us that the
metals used in our products are not sourced from mineral trade associated
with the conflict in the DRC. HP is working alongside companies in other
industries to drive the creation of such a mechanism. We believe that it is
our responsibility to create awareness and encourage accountability in our
supply chain and we will continue to do so until a defined certification process
is established.

As we continue to develop our supply chain SER program to achieve lasting
results in our supply base, we remain committed to the open and collaborative
process we established ten years ago.